A valuable forecasting tool for predicting recessions 2-6 quarters ahead. The yield curve is defined as the difference (or spread) between the 10-year Treasury note and the 3-month Treasury bill.
* A slowdown or fear of a recession causes the people to demand higher interest rates for short-term borrowing.
*There is no guarantee that an inverted yield curve will always predict a recession; but when it does be vigilant and look for a strategy favoring a weaker dollar or currency pair.